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WhatWood Global Trends Review Global Trends Review, February 24 – March 09, 2014: China boosts investments into foreign timber processing; Moody’s anticipates pulp price decline

Global Trends Review, February 24 – March 09, 2014: China boosts investments into foreign timber processing; Moody’s anticipates pulp price decline

13 March 2014 ` 16:44  

Chinese timber enterprises are rapidly increasing foreign investments. Around $1.3 billion has been already allocated in some 20 countries, mainly for logging and primary processing, but with growing interest in wood product manufacturing, as ITTO reported.

Recently, both private and state enterprises started to invest into foreign assets. Also, the pattern changed in how the companies allocate funds: earlier, there were mostly direct investments, but now joint ventures, share acquisitions and other forms of strategic alliances appear.

The inexperience of Chinese enterprises to assess and deal with risks in the international market needs to be addressed, the Chinese government admits, as it intends to foster greater international competitiveness and strengthen management in Chinese enterprises to encourage the creation of respected multinational companies with an international reputation and influence.

One key area of concern is the strengthening of industry self-regulation. In the process of fighting against illegal logging and associated trade, enterprises are key players and the government and industry associations need to strengthen their guidance and improve social responsibility.

China also aims to increase its forest cover 23% by 2020 in order to meet growing log demand. These efforts are being challenged by farming, industrialization and urbanization.

Finnish forest industry made €934 million worth of investments in 2013, more than any other industry sector in Finland, TTJ reports. Predicted investments for 2014 are close to €700 million, less than last year, although a decrease had been wrongly forecast for 2013. However, this is still not sufficient to maintain industry’s production equipment.

UPM invests €160 million into Kymi pulpmill (Kouvola, South-East Finland) to strengthen its position in the growing end use segments of the global pulp market. With this investment, Kymi’s annual pulp production capacity will increase by 170,000 tonnes to 700,000 tonnes of bleached northern softwood and birch pulp.

Kronospan is going to build a new OSB mill in Poland and also plans to set up a research and development centre, as Fordaq said quoting WBPI (Wood Based Panels International). The mill is to appear close to operating Kronospan facility in Strzelce Opolskie. Investment scope of the project is around €102.9 million, with 29% being covered by a grant approved by the European Commission. Launch is scheduled at 2015. As for the R&D centre, Kronospan will establish collaboration with the Wood Technology Institute (Instytut Technologii Drewna), a research institute based in Poznan, Poland.


Timber Trade Federation (United Kingdom) has made E1 formaldehyde emission standard compulsory for panel production, effective from June 1, 2014. This means that placing orders for products of E2 class will not be permitted for federation members. This is not a legal obligation, as companies that do not belong to this association will have the right to do otherwise.

In Austria and German region of Bavaria, it seems that after a mild winter there is oversupply of logs, after a long period of wood deficit. As Holzkurier notes, at the same time the mountainous regions of Austria, as well as Slovenia and Croatia suffered very cold weather. February prices for logs are €99-103/m3 in Baden-Wuerttemberg and Bavaria, €100-104/m3 in Austria.

In the Czech Republic, harvesting activity is at similar high level as in Austria. Czech roundwood is exported to Austria with slight price reductions of €2-3/m3. As Fordaq adds, last year, log deliveries from the Czech Republic to Austria rose by 27%, while shipments to Germany increased 21%.

The trade association proPellets Austria presented annual report for 2013. 10,500 new pellet heating systems were installed last year (+10%), while pellet production rose from 890,000 to around 960,000 tonnes, as Fordaq quoted proPellets. This year, a million-tonne level is expected. By 2020, pellet consumption could double, as said by association President Dr. Christian Rakos.

Austria has the second highest pellet consumption per capita worldwide after Estonia – 95 kg of wood pellets a year. The 2013 newly installed pellet boilers are primarily in single-family homes for use or to replace the old oil heaters. For a single household with an annual demand of about six tonnes, the savings after switching from oil to pellets are about €1,200.

Metsä Fibre increased the price of Botnia Nordic Pine (NBSK pulp grade) in China, effective March 1, 2014. The new price is $770 per tonne. As of February 1, Metsä Fibre also increased NBSK price in Europe by $30 per tonne to $930/t.

Shrinking market demand, with anticipated 5% annual declines in paper demand going forward, will underpin continued challenges for European paper and forest products companies in 2014, says Moody’s Investors Service in its report. Moody’s notes that diversification away from paper is key for profitability improvements in 2014.

Moody’s also anticipates that pulp prices are likely to fall in 2014. This is because substantial new capacity in Latin America (mostly in hardwood pulp) will enter production during the next three years, adding around 7 million tonnes to global pulp capacity.

WhatWood’s reviews are prepared using corporate press releases, Holzkurier, Timber Trades Journal, Fordaq, EUWID Wood Products, ITTO, ForestTalk, and EUWID Paper.

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